Why you should invest in public provident fund (PPF)?
If you are employed in a company, you must be paying provident fund from your salary. Normally in case of employees, employer deduct PF every month and remit.
But, in case of self employed, Public Provident Fund or PPF is best option for retirement planning.
I love PPF for many reasons.
Do you know, PPF is the only investment which can not be touched by even government.
Every business owner or person should invest in PPF for reason that it is insolvency proof.
What is Public Provident Fund (PPF)?
PPF was launched in year 1968 to encourage saving habits.
It is highly popular for it being exempt from taxes. Interest earned on PPF accounts is exempted from tax, you can also claim investment under section 80C of income tax.
PPF account can be opened in any bank or post office.
PPF accounts come with a maturity period of 15 years.
Maximum investment in PPF account can be made for Rs. 1,50,000 in a year.
What are benefits of investing in PPF account?
Investing in a PPF account is highly suggested. As a businessman, what option do we have for retirement funds? PPF is best suited for retirement funds.
Benefits of investing in PPF account are:
- Tax deduction under section 80C for investments
- Interest earned on PPF account is tax free
- Investment in PPF cannot be attached under any proceedings
- Return is better than Fixed Deposits
- Long maturity period and lock in period ensures funds are not withdrawn and investment is kept for purpose
The biggest advantage I see with a PPF account is that it cannot be attached for any matter.
Take an example, you took a loan for your business but for some reason business failed. Bank will start selling your personal assets to recovers its dues. However bank or court cannot attach your PPF account and that means your money invested in PPF is safe.
Interest rates under PPF
Interest rate on PPF account is revised every year.
It keeps changing with inflation and other factors.
Here is a record of historical PPF interest rates.
|Financial Year||Interest rate (p.a.)|
|2016 – 2017||8.1%|
|2015 – 2016||8.7%|
|2014 - 2015||8.7%|
|2013 - 2014||8.7%|
|2012 - 2013||8.8%|
|2011 - 2012||8.6%|
|2010 - 2011||8.0%|
|2009 - 2010||8.0%|
|2008 - 2009||8.0%|
|2007 - 2008||8.0%|
|2006 - 2007||8.0%|
|2005 - 2006||8.0%|
|2004 - 2005||8.0%|
|2003 - 2004||8.0%|
|2002 - 2003||9.0%|
|2001 - 2002||9.5%|
|2000 - 2001||11.0%|
Interest rates are really good and better than FD or RD account. Further tax is not charged on interest earned thus effective return on PPF will way more higher than returns on FD accounts.
Features of a PPF account
- Maturity period of PPF account is 15 years. For this, period is calculated from the last day of financial year in which PPF account was opened.
- Maximum amount you can deposit in a year is Rs. 1,50,000.
- Nomination is allowed.
- Loan facility is available against deposit in PPF account.
- Withdrawal is possible from 7th Year. Complete withdrawal is possible only after maturity.
- Joint accounts are not allowed.
- Interest is credit at end of year but calculated on monthly basis.
- Extension of 5 years after maturity is allowed.
- You can transfer your PPF account from one branch to another branch or another bank also.
Eligibility to open a PPF Account
- You can open only one PPF account. Multiple accounts are not allowed.
- You can open account in name of minor child but limit of Rs. 1,50,000 will be calculated considering deposits in your and child account.
- NRIs cannot open PPF account.
- HUF cannot open a PPF account.
- Foreign citizen cannot open a PPF account.
PPF investment is one of the most popular and highly rated option for retirement planning.
It is a very rare investment with attachment proof. Business is uncertain, you must open a PPF account to save some amount for your retirement.
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